...and that was it for a jittery thin European opening. All eyes on the BOE for today with all FX markets entering in no man land till then. Lots in play today from the FA side. Last meeting BOE kicked the can but today action seem unavoidable.
--> On the fundamental side:
Everything on the table for today with 3 main things to track: Rates, Monetary Policy expansion and Economic outlook.
--> On the fundamental side:
Everything on the table for today with 3 main things to track: Rates, Monetary Policy expansion and Economic outlook.
- On the rate front: Markets expecting a rate cut 0.25, anything larger will be a slight extra and wont affect the general outcome. However a flop (no cuts) will short-circuit a heavily aligned market and send shockwaves both in Sterling and UK Equities.
- On the monetary policy front: from a fresh bond-buying programs to corporate bond purchases and everything in between on the table. This one is the trickiest part for today and it will trigger the major moves outside of the interest rate headlines for the mass media and general public. Expectations are divided and not clear here and each policy will have different implications.
- Marketwise a flop (nothing announced in this front) will leave us in the status quo (nothing new) leaving the door wide open for more action in BOE next meeting (high odds on this option),
- while any additional measure will trigger a sharp rally reaction in Equities and sell-off in Sterling. The speed and force will depend on the details and scope of the new measures announced.
- On the Economic outlook front: Markets expecting a rather calm BOE trying to turn down the heat on Brexit jitters and focus on waiting for further data to avoid panic especially in thin summery markets. Not much expected on the macro front except for caution for the months ahead, However expecting warnings on the inflation front as forecast expect to overshoot for the rest of the year given the massive devaluation Sterling.
- Marketwise. A cautious BOE on the macro front with highlights of potentials spike in inflation for nothing new but it will start creating a cluster fuck in Sterling in the mid term as soon as inflation start ticking up.
- A panicky, aggressive BOE (Not expected at all) triggering a bazooka via the economic uncertainty and initial impact of Brexit will send massive shockwaves across the board triggering risk and panic across Europe. Equities short-circuiting and any policy effect will be very short-lived as economic fundamentals will take markets by storm from Sept onwards while Sterling will trigger a double whammy major capitulation move via QE/rates and poor outlook.
--> On the technical side:
Things a bit easier and clear 3 main options.
- An inline/nothing new with expectations BOE will trigger Equities to keep riding the pig on free money 659x ->687x for the summer with momentum with US tomorrow not flopping in NFP. While in Sterling 1.322x is the only level and rain maker in play short term, everything else in the range is noise. Mid term ext and long term swings target in play only at these levels so it will stay in choppy limbo short term until the final push to unlock capitulation leg 1.322x -> to the lows of the 1.2x handle (+/-1.22xx).
- A major bazooka will trigger a one way WTF leg in Sterling, sweeping the lows to the test the Brexit lows cracking the floor and leaving Sterling 'floor-less' for September while on Equities it will trigger a zigzag play to set the high of the Quarter and this year for a play 659x->687x->6000.x until further data.
- A flop for profit taking in equities for the summer setting the high of the Quarter in a direct move 670x -> 620.x and in Sterling it will trigger a short squeeze 1.328x -> 1.35xx unlocking but not triggering the extension to the 1.39xx.
--> For the Actual flows (GU only)
All micro levels raised as usual in reports like that.
Inline / nothing new BOE for a direct play 1.331x-> 1.293x with momentum 1.322x. A disappointing BOE unlock a short squeeze taking the current highs to 1.350x and extension 1.390x with a BOE not even cutting rates. Finally a BOE bazooka for a direct and sharp leg 1.331x-> 1.246x with a stopover on the brexit lows.
GL all trading, planning to trade or just tracking a key policy decision in the FX board and beyond.
sisse
Pending conversations? PM for a chat...I am mainly in OTM now